You Credit Score: How's Your FICO?

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Because our world is so computer-driven, it's probably not that surprising that your ability to repay your mortgage loan boils down to one number. Credit reporting agencies use your loan payment history to compile a FICO score.

TransUnion, Equifax, and Experian, the three major credit reporting agencies, each have their own proprietary formula for building your credit score. Fair Isaac and Cooriginally developed this score. . While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, the differences aren't huge; each agency uses the following factors in building your credit score:

• Your Credit History - How long have you had credit?
• Late Payments - Have you paid more than 30 days late, and how often?
• Balances on your Credit Cards - How many accounts do you hold, and how much do you owe on them?
• Inquiries on Your Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?

Each of these is assigned a value and a weight. The result is one number. Credit scores range from 300 to 800. Higher is always better. Most borrowers who want to get a mortgage in the current environment have a score above 620.

Not just for qualifying

Credit scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are probably a better credit risk, and thus may qualify for a better mortgage rate.

Improving your score

Unfortunately, there isn't a lot you can do to immediately improve your credit score. Despite what you hear from "credit repair" companies, the FICO score is based on your lifetime credit history, so you can't turn it around right away. (Of course you can and should remove incorrect data on your credit report.)

Getting your FICO score

In order to raise your FICO score, you must have the credit reports that are used to build it, and of course, you need the score itself. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive, fast, and easy to get your credit score as well as credit reports from all three credit reporting agencies. Also available are helpful information and online tools that can help you analyze what actions might have the greatest impact on your FICO score.

You can get a federally-mandated free credit report once a year from all three agencies at AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting it is quick and inexpensive.

Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.

Curious about credit scores? Give us a call at (859) 240-1231.